This week we are demonstrating a volume based trading approach on KIN, but it can be adapted and used to trade other projects. The goal is to have a completely volume based trading approach. With smaller projects that can be all you need to predict the next move - in fact this strategy racked in +1130.8% in the past 6 months. Compared to KIN's 475% appreciation, the result of the strategy is stellar.
We'll be using OBV to gauge volume. On balance volume shows a total of the asset's trading volume and indicates whether this volume is flowing in or out. If you want to find projects that will be trending OBV is a great tool to see if there is potential. The swings on smaller market caps can be higher so adjust accordingly.
WILL POST POSITIONS BELOW
The goal of the strategy: - to beat holding KIN in that period - a dynamic strategy that has us in a position most of the time, exits when volume is outflowing - work with % changes in OBV rather than numbers as we want to be potentially able to use the strategy on another pair - simple to track and execute
The strategy: Initially we tried to catch the breakouts by involving other indicators too, but upon experimentation they proved to be unnecessary. This was the most fruitful set-up. 1 H chart - open position when: OBV is up by 2% in last 2 days - close position when: OBV is down by 3% in last day - no SL/TP - only market based conditions - do not open a position is both the open and s are correct at the same time. If you find it difficult to manually 1track those OBV changes they can be automatically tracked in CLEOone.
The results: This strategy brought +1130.8% in the past 6 months, beating holding KIN which would have you at +475%. Not only does the strategy win more positions than it loses (290 vs 273) it also wins more than it loses on average - +4.07% vs -2.95%. The average position was held for 2 hours with almost 4 positions open per day.
Interesting and thank you for sharing this. Just a quick question... you buy sell based on the alerts? And then when you buy do you set stop loss or limit order, or just wait first for the alert. I am new to investing and would love to learn more about daily trading. At the moment I am using Phoenix Ascending. The green line shows exactly what that OBV indicator shows so I might stick with that one as it shows so much more.
CleoFinance
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@winkleroto, This one is run without a sl/tp but the close condition is always respected. IMO most of the time market based close rules work better than % based TP/SL. Does Phoenix Ascending have % chnages? Not sure if tradingview has it, but check out cleo.one you can set the strategy to run on paper trading and get alerts in your inbox.
Peter43211234
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@CleoFinance, again 3rd post of yours I love! Haha
I'm curious if a SL would have allowed for less losses...or would it have meant incorrect closes on retraces that ultimately led to gain in the winning trades? (As oke guess)... Did you back test using SL vs not?
CleoFinance
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@Peter43211234, Thanks Peter much appreciated! It often comes up that market based rules are supperiour to SL/TP - but of course it depends on many factors. It might be a good idea to do a comarison in the future to demonstrate this. The issue I think is that market based rules are easer to ignore. A SL is often easier to stay disciplined on - 2% is always 2%.
Will do a little experiment on this and get back to you.
CleoFinance
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@Peter43211234, Hi! I ran a few tests with using a SL and can confrm that the strategy performs better without it. This is usualy due to the volatility of these small-cap projects where positions tend to go up/down before reaching the target. Of course it's not always the case but in this case that's what we see.
Hope it helps!
Peter43211234
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@CleoFinance, brilliant.. thank you for running the tests... [where the tests your platforms built in backtesting option?] so I see 3 options here recently: the OBV method, the candlestick pattern on and BB bounces: to choose which one to use, one could apply backtests per coinpair choice to see what works, put in and take out SL in the tests, then set it and forget it? [is it possible to forget it on your platform if you trust the coin will go up?] [none of this is fin advice, and neither is your answer :)))